Turn parking garages into pension payments.
That's what Pittsburgh Mayor Luke Ravenstahl wants to do, by leasing the Pittsburgh Parking Authority's 11 Downtown parking facilities -- and maybe even its neighborhood lots and meters -- to a private operator in return for hundreds of millions of dollars that would shore up the woefully inadequate pension fund.
"We're going to need some sort of influx of cash," the mayor said of the fund, which at last count contained just $261 million of the $899 million it should ideally hold. "I have been approached numerous times about the value of these assets," he said of the parking garages, and now he wants to test the market.
"I think it's really an interesting idea," said Controller Michael Lamb, who, like the mayor, sits on the Pension Fund Board. "It's something that we, at the very least, should learn about and find out what kind of interest there is and what kind of funding it could generate."
The potential downside: Parking rates could rise, though that might be constrained by whatever contract emerges, Mr. Ravenstahl said.
"I've got to protect pensioners, I've got to protect city taxpayers," he said. "And of course I'd like to protect parkers, too, but not at the expense of city taxpayers and pensioners."
The city's pension problem has been brewing for more than a decade, but has been worsened by the stock market's decline. With just 29 percent of the money it should have, the fund is in a danger zone -- and it could get worse.
Now, 11 cents of every city budget dollar must go to the pension fund. Without an influx of cash, that amount is expected to rise to 20 cents on the dollar within two decades.
Put in $300 million, and the fund can be 87 percent full -- considered healthy -- in 20 years, Mr. Ravenstahl said.
Can the long-term lease of the garages raise that much? Mr. Ravenstahl said he didn't know. The first $108 million must go to pay off authority debt.
Mr. Ravenstahl said that Chicago raised $1.7 billion by leasing its garages for 99 years and its meter system for 75 years. He said Harrisburg is working on a plan to reel in $215 million via a 75-year lease of its garages.
The facilities are leased, rather than sold, because that way the private operator doesn't have to pay deed transfer and property taxes.
Next Thursday, the Parking Authority board will vote on whether to invite firms to help craft a garage leasing plan. It would then issue a second invitation to big companies that could offer an up-front payment for long-term control of the garages.
Mr. Ravenstahl said both processes should be open and competitive.
The Parking Authority has traditionally had the lowest rates in town, at $9.75 to $13.75 for all-day parking, versus $13 to $22 at private lots.
Merrill Stabile, president of Alco Parking Corp., the city's biggest private operator, said he doesn't think rates will skyrocket if the public garages are leased out.
"There was a time when if garages were privatized, rates might go up 50 percent," he said. "But that has since changed because the Parking Authority has been more aggressive in setting its rates.
"Sometimes, private operators and entrepreneurs can be even more resourceful," he said. "They might lower some rates to bring in more business."
He said he's not interested in leasing them, predicting that the bidders would be "billion-dollar funds."
City Councilman Patrick Dowd said that "a free market is great, but that may not be what we want in terms of making [Downtown] office space appealing for employers." He said any lease of garages should be coupled with a long-term strategy for keeping Downtown viable.
Mr. Ravenstahl noted that he has spearheaded development of a four-point plan of changes to state pension rules that would steer more aid to troubled municipalities and help them to merge funds.
He also has established a no-new-debt policy and cut health insurance costs by $17 million over three years.
A parking lease would be "another piece of the ultimate, what I believe, plan for the long-term legacy costs for the city of Pittsburgh."
Rich Lord can be reached at firstname.lastname@example.org or 412-263-1542.